Financial news

Trading activity during yesterday's session at the Malta Stock Exchange was spread across ten equities with increased levels of activity. Declines in the two major banking equities meant that the main index closed lower by 0.25 per cent at 4,899 points.

HSBC Bank Malta shed 1c or 0.2 per cent on a single transaction which saw two investors swap 1,000 shares at the €4.839 level. Trading activity was uncharacteristically low in the largest listed company on the local exchange.

Bank of Valletta attracted more voluminous trading as 14,724 shares were swapped across 17 transactions, squeezing the price down by 5c or 0.7 per cent to close the day at a multi-year low of €6.50. The equity reacted to Friday's Interim Director's Statement, where the board announced that it expected the financial results for the current half year to come in lower than those published for the same period last year.

Go was one of just two equities that managed to close in positive territory. The day's transaction saw an investor purchase 1,000 shares at the €3.035 level which represents a 0c5 premium to its previous closing level.

Malta International Airport was the day's top gainer, with buying activity clearing 4,750 shares off the offer side and pushing the price higher by 2c or 0.6 per cent to €3.22.

MaltaPost continued to command the lion's share of the day's trading activity with 141,276 more shares changing hands across 48 transactions. The equity traded within a 5 per cent band between a low of €0.60c and a high of €0.63c. The final trade of the day was nevertheless struck at €0.611, which represents a 0c9 or a 1.4 per cent drop from the opening price of the session.

Medserv was the day's top loser as 3,400 shares were sold across two transactions on an unusually-thin bid side, which brought a 10c6 or 2.6 per cent drop in its price which eventually settled at €4.044.

Elsewhere in the market, trading activity in Lombard Bank Malta, International Hotel Investment, FIMBank and Crimson Wing did not alter their previous valuations of the respective companies.

US economic review - weekly round-up

The sharp plunge in equity markets at the beginning of last week prompted the Federal Reserve to cut the key interest rate by 75 basis points in an emergency meeting, a week prior to the next regular FOMC (Federal Open Market Committee) which is effectively scheduled this week.

The FOMC stated that "The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth." According to the Fed, the inflation trend must be closely watched. Nevertheless, the Fed still expects that the price growth rates will slow down in the coming months.

Since last Tuesday's Fed action, financial market conditions have meaningfully improved. The stock market reacted positively, the Treasury yield curve flattened and credit spreads tightened. Futures markets are looking at 80 per cent probability of a 50 basis point rate cut in tomorrow's meeting. A 25 basis point cut or no change would deeply disappoint the market.

Another important development during the past week was the announcement of a fiscal stimulus. Backed by bipartisan support the US government should be launching an approximate $140 billion tax cut, which will be split in $100 billion in tax rebates for individuals and $40 billion for investment tax credits for businesses.

This article has been prepared by Bank of Valletta p.l.c. (the Bank), which is licensed to conduct investment services business by the MFSA, for your general information only. This information is not a solicitation or offer by the Bank to acquire or sell securities. Nor does it constitute any form of advice by the Bank. Appropriate advice should be obtained before making any such decision. Past performance is not necessarily a guide to future performance and the value of your investments may fall or rise.